Markets will be focused on the US this morning as President Donald Trump will make a speech to Congress today on his first days in charge.
USDX – Daily Chart
The price of USDX is now trading at 105.53 and is now moving back toward the level of Trump’s election win. Some support at the current level could hold but the last two days were very bearish.
Trump’s speech at 10am HKT could move the US dollar and he will explain to lawmakers why tariffs are needed. Traders will look for clues on any further escalation of the import taxes. The President’s last speech was one hour and on social media he said it would be “big,” where he would “tell it like it is”.
His first steps have included a recent pause to Ukraine aid, mass firings of Federal employees, and the uncovering of fraudulent transactions through the USAID program. Markets will be focused on his tariffs which have rocked the global economy with large tariffs introduced against Canada, China, and Mexico.
“The market is thinking about the negative impacts of tariff uncertainty to the US economy, and the traditional haven bid on the dollar is being questioned,” said Sarah Ying, head of FX CIBC Capital. “We are in between a thematic shift: the market is pivoting from being systematically bullish to bearish US dollars”.
“The initial market moves suggest that investors are not convinced that the tariffs on Mexico and Canada will be durable, or the start of more significant trade disruptions,” Goldman Sachs strategists wrote in a note. “As a result, investors have instead seen initial moves as a way to position for what has been the main market narrative in recent weeks—US underperformance”.
It would be unhelpful headlines for Trump if stocks and the US dollar weakened beyond the levels of his election win after a short time in office.
The bigger picture for investors is that Trump is creating a division between some of the country’s staunchest allies with the UK and Europe looking to a world beyond the US.
Markets are starting to believe that the dollar’s exceptionalism is over and that other safe havens may come into play. Tariffs may also usher in a recession across the world which would drag down the consumer economy in Trump’s second term.
